This paper introduces an index of tax optimality that
measures the distance of some current tax structure from the optimal tax
structure in the presence of public goods. In doing so, we derive a [0, 1]
number that reveals immediately how far the current tax configuration
is from the optimal one and, thereby, the degree of efficiency of a tax
system. We call this number the Tax Optimality Index. We show how
the basic method can be altered in order to derive a revenue equivalent
uniform tax, which measures the size of the public sector. A numerical
example is used to illustrate the method developed.
JEL Code: H21, H41.
Keywords: Tax optimality index, excess burden, distance function.
Authors Affiliations: Raimondos-Møller: Copenhagen Business School, CEPR,
CESifo, and EPRU. Woodland: University of Sydney.

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This paper analyzes the effects of mixed public-private R&amp;D incentives and empirically tests whether patents that were publicly sponsored are more important than non-subsidized ones. Blending patents and public subsidies will allow the funding agency to subsidize inventions that would otherwise not elicit investment because the private incentive will not fully cover the cost of the invention. Thus, the policy maker will only subsidize inventions that have a high social value. The empirical analysis shows that subsidized inventions result in more important patents, as measured by the number of forward citations.

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This paper examines the effect of taxes on the individuals' choices of educational direction, and thus on the economy.s skill composition. A proportional labour tax induces too many workers with high innate ability to choose an educational type associated with high consumption value and low effort. This increases the skill mismatch and aggregate unemployment in the economy. The government can correct for this distortion by use of differentiated tuition fees or tax rates.
JEL codes: J64, J68, H21, H24
Keywords: Unemployment, matching, education, optimal taxation, tuition fees

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Internationalization offers enhanced opportunities for individuals to place savings
abroad and evade domestic saving taxation. This paper asks whether the concomi-
tant loss of saving taxation necessarily is harmful. To this end we construct a model
of many symmetric countries in which public goods are financed by taxes on saving
and investment. There is international cross-ownership of firms, and countries are
assumed to be unable to tax away pure profits. Countries then face an incentive
to impose a rather high investment tax also borne by foreigners. In this setting,
the loss of the saving tax instrument on account of international tax evasion may
prevent the overall saving-investment tax wedge from becoming too high, and hence
may be beneficial for moderate preferences for public goods. A world with 'high-
spending' governments, in contrast, is made worse off by the loss of saving taxes,
and hence stands to gain from international cooperation to restore saving taxation.
JEL-Classifcation: H87, H21
Keywords: Capital income taxation, cross-ownership, coordination

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This paper explores potential explanations behind the educational gap between young natives and immigrants using two measures, negative attitudes towards immigrants and networking, which may influence natives and immigrants differently. The paper considers, both theoretically and empirically, the impact of negative attitudes and networking taking into account that these parameters may influence high and uneducated workers as well as immigrants and natives differently, creating different incentives to acquire education for the two ethnic groups. Using rich Danish administrative data, this paper finds evidence that greater negative attitudes increase incentives for males to acquire education and that networking also increases immigrant education.

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We develop an extension of the familiar linear mixed logit model to allow
for the direct estimation of parametric non-linear functions defined over structural
parameters. A classic application is the estimation of coefficients of utility functions
to characterize risk attitudes. There are several unexpected benefits of this extension,
apart from the ability to directly estimate structural parameters of theoretical interest.

Experimental data exhibit considerable individual heterogeneity. We review
the econometric methods employed to characterize that heterogeneity. We pay
particular attention to the trade-off between collecting and allowing for observable
characteristics, such as the familiar demographics, and the use of statistical methods
to allow for unobserved individual heterogeneity. We demonstrate that these tools
are complementary.

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This paper examines the welfare implications of non-discriminatory
tariff reforms by a subset of countries, which we term a non-preferential trading
club. We show that there exist coordinated tariff reforms, accompanied
by appropriate income transfers between the member countries, that unambiguously
increase the welfare of these countries while leaving the welfare of
non-members unaltered. In terms of economic policy implications, our results
show that there exist regional, MFN-consistent arrangements that lead
to Pareto improvements in world welfare.
JEL code: F15.
Keywords: Trading clubs, non-preferential tariff reform, Kemp-Wan-Ohyama proposition.

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This note discusses the generational incidence of consumption taxes in an OLG framework.
The objective is to highlight the channels through which an increase in, e.g., a VAT redistributes
income across generations. It turns out that with labor supply exogenous VAT incidence is very
similar to the impact of a PAYG pension system or government debt.

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Diamond’s two-period OLG growth model is based on the assumption that the stock of capital in any period is equal to the wealth accumulated in the previous period by the generation of pensioners. This stock equlibrium condition may appear an innocuous paraphrase of the ordinary macro-economic flow equilibrium condition, S = I.
This is not the case. In this note I demonstrate that Diamond’s solution is unstable in a monetary market economy where households and firms make independent decisions as to how much to save and how much to invest. An increase in the rate of interest above the Diamond long-run equilibrium level will cause saving to fall by more than investment and, hence, result in excess demand for loanable funds and an upward pressure on the rate of interest. However, substituting the ordinary S = I flow equilibrium condition for Diamonds stock equilibrium condition reveals that the model has another solution - the rate of interest equals the rate of growth - and that this solution is stable in a capital-based economy (contrary to the pure consumption loan model of interest suggested by Samuelson(1958)). The model has interesting implications. Diamond’s model predict that an increase in rate of time preference causing the young generation to save less will reduce the capital stock and raise the rate of interest. However,the S = I based two period OLG model reveals that the old generation’s consumption falls by more than the the young generation’s consumption increases. Consequently, excess supply of loanable funds will drive down the rate of interest. If the rate of interest is equal to the rate of growth an increase in the time preference has no effect on the supply of loanable funds and, consequently, neither on the rate of interest or the stock of capital. Whether people prefer to consume as young or old should not be a matter of public concern (although the transition from one state to another may be).

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A model of trade with several countries where local integration benefits all

Hansen, Bodil O.; Keiding, Hans(København, 2005)

[Flere oplysninger]

[Færre oplysninger]

Resume:

For the study of economic integration, it is costumary to use a three countryworld,
where two of the countries may introduce forms of closer economic cooperation. In
the present model, we follow this tradition but put special emphasis on the role of
credit and entrepreneurship. Our model is of the standard neoclassical type, with the
addition that production takes time and is subject to uncertainty. Also, firms must use
the financial system in order to buy inputs; the cost of credit may differ among countries
and industries, reflecting their basic patterns of uncertainty.
Following the Newbery-Stiglitz approach, we show that in such model we may
exhibit cases of Pareto inferior trade and, in particular, Pareto inferior economic
integration. More specifically, we show that integrating countries of very different
economic size may give rise to adverse effects on welfare, whereas integration of
countries with a more similar economic structure and size tends to have beneficial
effects for the parties.
Keywords: trade, uncertainty, Pareto inferior trade, regional integration.
JEL classification: F11, F15, F34